Correlation Between DHI and Sapiens International

Can any of the company-specific risk be diversified away by investing in both DHI and Sapiens International at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining DHI and Sapiens International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between DHI Group and Sapiens International, you can compare the effects of market volatilities on DHI and Sapiens International and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in DHI with a short position of Sapiens International. Check out your portfolio center. Please also check ongoing floating volatility patterns of DHI and Sapiens International.

Diversification Opportunities for DHI and Sapiens International

0.1

Correlation Coefficient

DHI  Sapiens International

Average diversification

The 3 months correlation between DHI and Sapiens is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding DHI Group and Sapiens International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sapiens International and DHI is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on DHI Group are associated (or correlated) with Sapiens International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sapiens International has no effect on the direction of DHI i.e., DHI and Sapiens International go up and down completely randomly.

Pair Corralation between DHI and Sapiens International

Considering the 90-day investment horizon DHI Group is expected to generate 0.84 times more return on investment than Sapiens International. However, DHI Group is 1.19 times less risky than Sapiens International. It trades about 0.04 of its potential returns per unit of risk. Sapiens International is currently generating about -0.08 per unit of risk. If you would invest  169.00  in DHI Group on September 4, 2024 and sell it today you would earn a total of  8.00  from holding DHI Group or generate 4.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

DHI Group  vs.  Sapiens International

DHI Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DHI Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal technical indicators, DHI may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Sapiens International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sapiens International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with DHI and Sapiens International

The main advantage of trading using opposite DHI and Sapiens International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DHI position performs unexpectedly, Sapiens International can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Sapiens International will offset losses from the drop in Sapiens International's long position.

The idea behind DHI Group and Sapiens International pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.